Cyprus Variable Capital Companies: AIFs

There are two types of Variable Capital Companies in Cyprus; UCITS and AIFS. Read on to find out more about Alternative Investment Funds.

Cyprus Variable Capital Companies: AIFs

Click here to read more about UCITS.

An ‘Alternative Investment Fund’ refers to any collective investment undertaking, including investment compartments thereof, which collectively:

(a)    raises capital from a number of investors, with a view to investing it in accordance with a defined investment policy for the benefit of those investors, and

(b)   does not require authorisation pursuant to section 9 of the Open-ended Undertakings for Collective Investments Law of 2012 or pursuant to the legislation of another Member State which harmonises the article 5 of the Directive 2009/65/EC.

For an AIF to operate as a Variable Capital Investment Company it shall take the legal form of a limited liability company, its name shall include the term: “Variable Capital Investment Company”, and it shall be in compliance with the provisions/requirements of the Law 131(I)/2004, outlined below:

 A. Main characteristics of a Private Company Limited by Shares:

*Please see notes from coresponding article.

 B. Main characteristics of the Variable Capital AIF:

General Characteristics of an AIF:

  • It is prohibited to an AIF that falls within the scope of the 131(I)/2004 Law to convert, in any way, to an entity that does not fall within the scope of the Law 131(I)/2004.
  • AIF management includes, at least, the service of the portfolio management of the AIF, meaning:
    • The management of the investments of the AIF and the management of the risks associated with the operations of the AIF.
    • The administration of the AIF and
    • Any marketing activities.
  • The AIF may be self-managed or externally managed, subject to certain conditions, and both are subject to registration in accordance with the provisions of the Alternative Investment Fund Managers Law, and CySEC regulations.
  • The units of an AIF may be admitted for listing in a stock market that operates in the Republic or in another EU member state or in a third country (where certain conditions are satisfied).
  • The shares of a retail investor AIF, established in the form of an investment company, may be admitted to trading in a stock market that operates in the Republic or in another EU member state or in a third country (where certain conditions are satisfied).
  • An AIF must comply with CySEC directives issued from time to time.
  • An AIF may consist of more than one investment compartments, each of which is subject to the provisions of the Law as a separate AIF. An AIF that consists of more than one investment compartments constitutes a single legal entity. Even if the AIF initially operates as a single scheme, it may convert to an AIF with multiple investment compartments, after a relevant amendment of its rules or instruments of incorporation.

Special characteristics for Variable Capital Investment Companies, under AIF legislation:

  • The variable capital investment company shall either be self-managed or appoint an external manager to manage its portfolio in accordance with Law 131(I)/2004.
  • Its sole purpose is the collective management of its portfolio, carrying out the relevant transactions to the benefit of its shareholders, either by itself where it shall be self-managed, or through the appointment of an external manager.
  • The procedure of increase and reduction of its capital shall be determined in its instruments of incorporation (without prejudice to the Companies Act).
  • Unless requested, the investment companies are not required to make available to their shareholders the full set of financial statements, which include the relevant auditors’ and directors’ reports.
  • The provisions of the Company Law regarding the convocation and conduct of general meetings of listed companies on a regulated market shall apply to investment companies mutatis mutandis, irrespective of whether they are listed on a regulated market or not.
  • Investment companies are not required to create reserves.

C. Registration of VCC under AIF legislation, Procedure Outline:

The commencement of operations of a Variable Capital AIF requires the prior authorisation and communication of the authorisation by the Securities and Exchange Commission in accordance with the provisions the 131(I)/2004 law.

The commencement of operations of a self-managed Variable Capital AIF requires the prior authorisation and communication of the authorisation by the Securities and Exchange Commission, in accordance with sections 7 and 8 of the Alternative Investment Fund Managers Law.

Where the AIF shall take the legal form of an investment company, as it is required for Variable Capital Investment Companies, whether self-managed or externally managed, the relevant applicant, in addition to the application for authorisation, shall submit to CySEC the following:

  • The name and the address of the registered office and of the central headquarters of the investment company.
  • Sufficient information, including a resume, for the members of the board of directors of the company and the persons managing its operations for evaluation by CySEC.
  • In case an external manager is appointed, its name and any other information that can identify and certify its appropriateness, as well as information about the person or persons of the external manager, that will be responsible for the management of the portfolio of the company.
  • In case an external manager is appointed, a statement confirming that it agrees to exercise the portfolio management of the company.
  • A statement from the Depositary confirming that it agrees to exercise the depositary duties for the portfolio of the company, in accordance with provisions of this Law, unless the exception where a depositary is not required to be appointed under section 23(4) applies.
  • The identity of the person or persons appointed by the depositary as responsible for monitoring the activity of the company.
  • The company’s draft instruments of incorporation.
  • The company’s draft prospectus.
  • The company’s draft key investor information document. and
  • Any additional or clarifying information.
  • Within three months of the submission of a complete application file CySEC will notify whether or not authorisation has been granted.

Furthermore, in the case where a Variable Capital Investment Company has not designated a Management Company, as per the provisions of the law, CySEC will grant their authorisation, only where it is satisfied that:

  • The application for authorisation is accompanied by the operations manual, which includes, at least, the organisational structure of the investment company.
  • At least two (2) of the persons who effectively direct the business of the investment company are of sufficiently good repute and experienced.
  • Where the existence of close links between the investment company and other natural and legal persons does not prevent the effective exercise of its supervisory duties.
  • The investment company has the appropriate shareholding structure, the required organisational structure and staff and the appropriate economic and technical resources to be in the position to provide its services.
  • The Board of Directors shall undertake the duties and responsibilities of the external manager, which shall appoint, at least, a duly certified person responsible for the portfolio management.
  • The company shall establish and maintain internal control and regulatory compliance functions which are independent from its other functions and activities, where justified.
  • The VCC is subject to the provisions of sections 20 to 22 of the Alternative Investment Fund Managers Law and to sections 75 to 82 of the Regulation (EU) No. 231/2013, respectively.

 D. Other key information relevant to VCCs under AIF law:

Minimum initial Capital:

  • Self-managed investment company: Three hundred thousand (300.000) euros.
  • All other cases of investment companies: one hundred and twenty five thousand (125.000) euros.
  • Multiple investment compartments in one company: the above amounts respectively for each compartment.

The registered office of the investment company is located in the Republic.
The initial capital of an investment company shall be divided in shares with no nominal value, which are nominal and fully paid. Fractions of shares shall not be recognised.


Legislation:                       1. Open-type Collective Investment Firms Law of 2012 (78(I)/2012) (GR)

                                           2. Alternative Investment Funds Law of 2014 (131(I)/2004) (GR)

                                           3. Companies Act, CAP. 113 (GR)

                                           4. CySEC regulatory framework: UCITS (EN), AIF (EN)